Figure 4-6
The Fast & Furious Company produces two products: toy planes and toy race cars. They use departmental overhead rates for the two production departments: molding and finishing. Molding uses machine hours to assign overhead and Finishing uses direct labor hours. 50,000 planes and 250,000 race cars are produced. Please find the following data:

-Refer to Figure 4-6. What is the overhead per unit for race cars? (round to 3 decimal places)

Question

Figure 4-6
The Fast & Furious Company produces two products: toy planes and toy race cars. They use departmental overhead rates for the two production departments: molding and finishing. Molding uses machine hours to assign overhead and Finishing uses direct labor hours. 50,000 planes and 250,000 race cars are produced. Please find the following data:
 
-Refer to Figure 4-6. What is the overhead per unit for race cars? (round to 3 decimal places)

Quizplus · Accepted Answer

To find the overhead per unit for race cars, we need to first calculate the total overhead for Finishing department:
Total overhead for Finishing department = (Total direct labor hours in Finishing department) x (Overhead rate per direct labor hour)
Total direct labor hours in Finishing department = 175,000
Overhead rate per direct labor hour = $0.60
Total overhead for Finishing department = 175,000 x $0.60 = $105,000

Next, we need to distribute this total overhead across the total units produced:
Overhead per unit for race cars = (Total overhead for Finishing department) / (Total number of race cars produced)
Overhead per unit for race cars = $105,000 / 250,000 = $0.42

Therefore, the answer is not A or D. 
Moreover, we need to choose between B and C. The correct answer is B because it is rounded to 3 decimal places as required in the question. Therefore, the best choice is B.

Figure 4-6 The Fast & Furious Company Produces Two Products: Toy Planes